Despite Bipartisan Support, Nuclear Reactor Projects Falter

By MATTHEW L. WALD

Published: April 29, 2011

WASHINGTON -- In an effort to encourage nuclear power, Congress voted in 2005 to authorize $17.5 billion in loan guarantees for new reactors. Now, six years later, with the industry stalled by poor market conditions and the Fukushima disaster, nearly half of the fund remains unclaimed. And yet Congress, at the request of the Obama administration, is preparing to add $36 billion in nuclear loan guarantees to next year's budget.

Even supporters of the technology doubt that new projects will surface any time soon to replace those that have been all but abandoned.

''My gut feeling is that there is going to be a delay,'' said Neil Wilmshurst, a vice president of the Electric Power Research Institute, a nonprofit utility consortium based in Palo Alto, Calif. News on Thursday that Exelon Corporation, the nation's largest reactor operator, planned to buy a rival, the Constellation Energy Group, only reinforces the trend; until late last year, Constellation wanted to build, while Exelon was firmly against it.

Mr. Wilmshurst said the continued depressed price of natural gas had clouded the economics of new reactors, and he predicted that construction activity would ''go quiet'' for two to five years. His group has shifted its efforts to helping figure out how existing plants can extend their licenses to 80 years from the current limit of 60.

Of the four nuclear reactor construction projects that the Energy Department identified in 2009 as the most deserving for the loans, two have lost major partners and seem unlikely to recover soon. In addition to low prices for natural gas, the demand for electricity is down, and the March 11 earthquake and tsunami that damaged the Fukushima Daiichi nuclear power plant could bring new rules.

Only $8.8 billion of the 2005 guarantee has been allocated -- to a twin reactor project in Georgia. Ground has been broken on the fourth candidate, a twin reactor project in South Carolina, but its sponsors may get a better deal in the commercial finance market.

The initial $17.5 billion was approved during the Bush administration, but President Obama has also embraced the idea of marrying nuclear power to solar, wind and ''clean coal'' to reach his administration's goal of generating 80 percent of American electricity from those sources by 2035. Mr. Obama's call for new loan guarantees came when the administration was seeking Republican votes in the Senate for a limit on carbon dioxide emissions, but he has stuck with the loan guarantees even after prospects for such legislation died after last fall's midterm elections.

The Republicans, who won control of the House, have portrayed such regulatory legislation as an energy tax. A White House spokesman, Clark Stevens, said that in the president's view, nuclear power would continue to be an important part of the ''clean energy economy'' he was seeking.

The Senate majority leader, Harry Reid, Democrat of Nevada, said on Wednesday that he favored more nuclear reactors and that loan guarantees were the only way to get them.

The idea was approved by the Republican Congress in 2005. Senator Lisa Murkowski of Alaska, now the ranking Republican on the Energy and Natural Resources Committee, has praised the Energy Department for issuing the first nuclear loan guarantee, for the Alvin W. Vogtle plant expansion, in Georgia. Senator Mitch McConnell of Kentucky, the Republican majority leader, supports loan guarantees as a step to build 100 new nuclear reactors.

One reason for all the financial support may be the way Congress does its accounting. The guarantees cost little or nothing to approve. ''It's not real money,'' Mr. Wilmshurst said.

A federal loan guarantee is a little like a parent co-signing a child's car loan; if the child makes the payments, the parent pays nothing. Under the 2005 law, borrowers pay a lump sum to the government to compensate the Treasury for the risk it is undertaking, and if the companies finish the projects and can pay back the loans, the government makes a profit.

The precise shape of new loan guarantees is uncertain, but when ''scoring'' the provisions for the purpose of calculating their expense, the White House says they cost nothing, and Congress assumes they cost 1 percent of the face value. But they are not without risk.

If the builders default, as happened on some nuclear construction projects in the 1980s, the taxpayer liabilities could run into the billions of dollars.

Officials at the Energy Department, which administers the loans, said they were confident that other developers would come forward and apply for the guarantees. Jonathan M. Silver, the executive director of the loan programs office, said, ''There is a significant queue of nuclear power plants in house that we will and are working on.''

''They may just go forward under a different time frame,'' he said, but he declined to estimate how many years it would be before the government could reach its goal of providing loan guarantees to six to eight reactor projects.

Mr. Silver said that by the time a reactor could be finished and brought on line, market factors might be more in the industry's favor. ''There are so many variables in this equation, taking a snapshot may be less relevant than watching the whole movie,'' he said.

Duke Power, for example, has been seeking to build a twin reactor in South Carolina that would also serve North Carolina. Company executives said that to move forward, it would need approval to charge customers for some construction expenses before the plant is completed. The company is still trying to line up additional partners, and has not made a final decision to build, a spokesman said.

Entergy Corporation, of New Orleans, has applied to the Nuclear Regulatory Commission for permission to build reactors in two locations, but has not reached the point of applying for loan guarantees. It will build ''in the event that we do decide that economics, load demand and other factors make new units favorable,'' the company said.

''There's not much else I'm aware of that's really actively moving forward right now,'' said Michael J. Wallace, a former Constellation executive who was the chief operating officer of its partnership with a French firm to build the Maryland project, the proposed Calvert Cliffs 3 reactor. With a carbon tax no longer appearing likely, he said a new kind of help, like a federal ''clean energy'' standard that would set a quota for nuclear and renewable electricity, might be needed.

Henry D. Sokolski, executive director of the Nonproliferation Policy Education Center, said he opposed government assistance for new reactors. He said that because the loan guarantees covered only 80 percent of the construction cost, project sponsors had to come up with the remaining 20 percent.

''Since the most likely candidates to pony up the 20 percent bailed out,'' he said, ''it doesn't augur well.''

PHOTO: The Energy Department issued the first nuclear loan guarantee for the expansion of the Alvin W. Vogtle plant in Georgia. (PHOTOGRAPH BY STEPHEN MORTON FOR THE NEW YORK TIMES)